Piketty gets it wrong

No policy proposed in recent years would have done more to expand capital ownership than allowing younger workers to invest a portion of their Social Security taxes through personal accounts. One of the unsung benefits of such Social Security reform is that it would enable even the lowest-paid American worker to benefit from capital investment. Indeed, since the wealthy presumably already invest as much as they wish to, lower-income workers would be the primary beneficiaries of this new investment opportunity.

In Chile, for example, workers, through their pension accounts, own assets equal to approximately 60 percent of the country’s GDP. As José Piñera, the architect of Chile’s successful pension reform, points out, personal accounts “transform every worker into an owner of capital.”

Moreover, my Cato colleague Jagadeesh Gokhale has demonstrated that, because personal accounts would be inheritable, privatizing Social Security would significantly reduce inequality across generations.

It is this “democratization of capital” that attracted honest liberals like Daniel Patrick Moynihan to the idea. Yet, Democrats in Congress today would sooner sell their first-born to the Koch brothers than even consider it.

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